Iran sets up euro-based oil bourse

Posted on » Saturday, May 06, 2006

TEHRAN: Iran's oil ministry took a step toward establishing an oil trading market denominated in euros, rather than the US dollar, by granting a license for the bourse, state-run television reported yesterday.

Just who would trade on the market wasn't immediately apparent.

Iranian television did not mention trading firms or governments willing to market or purchase products on the bourse, nor did it say when it would open for business.

"Iran has registered an oil bourse on the island of Kish in which oil would be sold in euros. The market will be the fifth oil market after New York, London, Singapore and Tokyo," the broadcast said.

Oil trading on those markets is conducted in dollars.

Iranian legislators earlier this year urged the government to set up the market to reduce the US' influence over the Islamic republic's economy. They also criticised Oil Minister Sayed Kazem Vaziri Hamaneh, saying he had delayed setting up the bourse.

If the market succeeds, observers say euro-denominated oil sales could eventually convince central bankers to convert some US dollar reserves into euros, offering potential for a decline in the dollar's value.

First floated in 2004 when president Mohammad Khatami was in power, the idea of a euros-traded oil bourse gained new life after the stridently nationalist Mahmoud Ahmadinejad was elected president last summer.

As the fourth largest oil producing country in the world, Iran has a measure of influence over international oil markets.